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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether, after dishonour of cheques issued under a compromise during pendency of a complaint under Section 138 of the Negotiable Instruments Act, 1881, the original complaint could be revived instead of treating the matter as requiring a fresh complaint.
Analysis: The compromise contemplated payment in full and final settlement, but expressly provided that on dishonour of the post-dated cheques the settlement would end and the original complaint would continue. The earlier view that the original complaint necessarily ceased and only a fresh complaint could be maintained was examined in the light of the later Supreme Court ruling, which held that a cheque issued merely to effect a settlement does not, by itself, create a new liability if the compromise does not fructify. Since Section 138 is attracted only where a cheque is issued towards a legally enforceable debt or liability, a settlement cheque that fails to discharge the compromise cannot be treated as displacing the original cause in the manner assumed by the Magistrate.
Conclusion: The order discharging the accused was set aside and the original complaint was directed to be revived before the Magistrate.
Ratio Decidendi: If a cheque issued in terms of a compromise is not honoured and the settlement fails, the cheque cannot be treated as creating a new enforceable liability for Section 138 purposes, and the original complaint may revive.
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